The overarching goals of this research program are to understand the psychosocial regulation of stress physiology in early childhood and the relations of stress system activity to children's socioemotional development. We focus on cortisol, a hormone produced by the Limbic-Hypothalamic-Pituitary Adrenocortical (LHPA) system. Theoretically, frequent prolonged elevations in cortisol increase risk of physical and emotional disorders (allostatic load model, CRH-model of anxiety/depression). Early experience animal studies suggest that variations in care help shape responsivity of the LHPA axis and the neurobiological substrate of fear/anxiety. Studies in children suggest that temperament correlates with children's vulnerability to the normal challenges of early life (e.g. separation, interactions with peers). We seek to understand how and whether sensitive adult care from parents and child care providers and the development of one facet of child regulatory competence (effortful control) modifies cortisol responsivity for more temperamentally vulnerable (fearful/anxious, angry/reactive) youngsters. We further examine the role of peer relationships (acceptance/rejection, dominance, lack of friends, and support/conflict in friendships) in mediating and/or moderating temperament-cortisol associations for children in group-care settings. Both naturalistic (home-based childcare and nursery school) and laboratory assessments are planned. The laboratory assessment will allow (1) objective measures of temperament to be obtained for export to the studies in naturalistic settings and (2) exploration of the roles of adult-child relationship and regulatory processes in moderating relations between cortisol responsivity and electrophysiological measures of the presumed neural substrate of fear/anxiety: fear-potentiated startle, and the tone of the sympathetic, pre-ejection period or PEP, and parasympathetic, respiratory sinus arrhythmia or RSA, arms of the autonomic nervous system (ANS). This work should help integrate research on the physiological basis of fearful/anxious temperament with the work on psychosocial regulation of stress in early childhood. We argue that normative developmental research complements and provides basic data necessary for research and theory on developmental psychopathology.